December 30, 2009

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September 13, 2014

In 2005, assessors valued the 559-acre Indianapolis Motor Speedway at $34.4 million for property tax purposes. According
to the latest figures from the Marion County reassessment, it now has a market value of $170 million.

If the new assessment stands, the track's annual gross property tax bills would increase fivefold, to more than $5 million,
assuming tax rates remain constant.

Thousands of other Marion County businesses also would see extraordinary spikes in property values, according to an IBJ
analysis of the latest assessment data submitted to the Indiana Department of Local Government Finance.

Gov. Mitch Daniels last year ordered the reassessment, saying he believes Marion County's nine townships historically
have done a poor job gauging the market value of commercial and industrial properties, leading their owners to pay unfairly
low property taxes.

But IBJ's analysis suggests the new effort also was plagued with problems. Many businesses saw huge jumps in
assessments that appear difficult to justify. And officials have continued to revise the data, even though they were supposed
to have submitted their final report to the state for approval last month.

"We still have problems," Marion County Assessor Greg Bowes acknowledged. "There was too little time, frankly,
to get everything done perfectly."

In October, Portage, Mich.-based Manatron Inc. signed a $1.85 million contract to reassess Marion County's 21,479 commercial
and industrial properties. It delivered that data last month to the Marion County Assessor's Office, which gave its report
to DLGF in mid-February. Bowes then made further revisions with Manatron's help and submitted a new report March 11.

The latest version assesses the county's commercial and industrial properties at $20.4 billion, with $1.4 billion of
the properties owned by tax-exempt organizations, such as hospitals. The $20.4 billion total represents a 41-percent increase
from the $14.4 billion total listed for 2005.

One in four Marion County business parcels would see increases in valuation of 100 percent or more, according to Bowes'
latest figures. An unlucky 783 commercial and industrial parcels would increase more than 500 percent.

While a handful of business properties saw decreases or no changes in their valuations, nearly 90 percent increased. And
much of the rise was concentrated among 2,208 business parcels whose assessments climbed at least $500,000. The Indianapolis
Motor Speedway property was one of 178 parcels increasing $5 million or more.

The DLGF now is evaluating Marion County's reassessment. Spokeswoman Mary Jane Michalak said it hopes to complete its
review in about a week.

"We're in the final stages of approving it," Michalak said. "It's a top priority ... but at the same
time we want to be sure the job is done right."

The state may face a no-win situation. If it quickly certifies the new property values, they're bound to spark a flurry
of expensive, time-consuming appeals from outraged business owners. But if it doesn't, property tax bills will be further
delayed and taxpayers will have to shoulder the cost of yet another assessment fix.

Either way, business valuation problems could undermine the Legislature's property tax reform efforts, since accurate
assessments are the cornerstone of a fair system. At IBJ's deadline, lawmakers appeared poised to approve a reform
plan that capped property tax bills at 1 percent of assessed valuation for homeowners, 2 percent for rental property, and
3 percent for business property.

"The county assessor and the DLGF can put any kind of spin on this they want to. But what we've seen is wrong,"
said Indiana Assessors Association President Becky Williams, who also serves as Franklin Township assessor. "It's
a mess."

"I believe we're going to be absolutely buried in appeals," she added. "And it's going to cost this
county severely."

Rushed reassessment

Indiana has been trying to transition to assessments tied to actual market values since 1998. It's been an awkward, painful
process, as officials attempt to apply "trending" to earlier assessments to come up with new values that reflect
current market conditions.

After widespread problems surfaced with assessments released last year, Daniels froze all property tax bills statewide and
ordered every Marion County property reassessed. In his reassessment order, Daniels noted that values for nearly three-fourths
of Marion County's commercial and industrial properties did not change over a six-year span.

Bowes, a Democrat, directed township assessors to handle the new appraisal of residential property and hired Manatron for
the commercial work. Manatron did not respond to IBJ's request for an interview. Bowes said the company asked
him to handle all media inquiries about the project.

Williams said Marion County hired Manatron because the only other vendor in the running, Dallas-based Tyler Technologies
Inc., demanded at least 18 months to do the job.

"The commissioner of the DLGF should have known they could not do this in four months," she said. "Manatron
in their own overview stated a project of this type normally takes 12 to 18 months. I think that pretty much says it all."

Bowes agrees, and said he's expecting an "onslaught" of appeals. But he said extreme pressure from taxpayers
and the DLGF forced him to get the project done faster. That's why his office was still making revisions more than five
weeks after the state's original reassessment deadline of Feb. 1.

"This is really something that should have taken a year," Bowes said. "But we have teachers and policemen
to pay. We need to get this done."

Some of Bowes' and Manatron's late changes have been substantial. For example, their first version of business reassessment
left 1,906 properties, mostly from Wayne Township, off the list due to what Bowes called a computer glitch.

The team also changed property values. Between the first and second versions, assessments for more than half the properties
increased--602 by $100,000 or more. For example, Bowes' mid-February submission listed the Indianapolis Motor Speedway's
assessment at $44.4 million. That's $125.6 million less than in the March 11 submission.

Track spokesman Fred Nation expressed surprise that Marion County had assigned a $170 million property tax value to "a
piece of land with a bunch of grandstands around it."

Even so, he said IMS will take a while to decide whether to appeal.

"When we receive official notice, we'll do a thorough review and decide then what our course of action will be,"
Nation said.

Bowes said he did not know the reasons behind assessment changes for individual properties.

The complex is one of five apartment properties owned by Lakewood, N.J.-based real estate firm WK Holdings LLC. Julian Blumenthal,
WK's chief financial officer, said the new assessment is "obviously a mistake," since his company bought the
property for about $5.1 million last year.

"I wish [it were worth $58.6 million]. Maybe if the state wants to give me that much money for it, I'd sell it tomorrow,"
he said. "This is obviously a ridiculous aberration."

Modern mass appraisal

Township assessors like Williams argue the problems prove the argument they've been making all along. They say property
assessment is a local function that they're best trained and equipped to handle.

"Maybe we don't want to turn this over to county assessors and vendors," she said. "You need somebody
in the area that knows the property."

But others draw different conclusions from the same results.

Michael Hicks, director of Ball State University's Bureau of Business Research, said computerized mass-appraisal systems
have proven accurate for decades. Such systems are far more dependable, he said, than a patchwork of assessors attempting
to update prior assessments that might have been flawed in the first place.

"The process in place prior to this is so broken it really begs the question whether the assessors that are there now
can ever do a decent job of creating a reasonable assessment," Hicks said. "It's like trying to predict the
orbit of a satellite using a slide ruler. My father did it back in the '60s. But it would be stupid to do today."

Real estate developer Stan Evans said some big increases in assessments may be justified, since properties that have been
improved would be worth more. He said that until all the assessments are finalized, and the Legislature completes its reforms,
it's impossible to come to conclusions.

But in the meantime, real estate deal-making is being affected, said Evans, vice president of commercial real estate for
Indianapolis-based Paragon Realty Cos. LLC. He said it's difficult to negotiate sales when potential buyers don't
know how much they'll pay in taxes.

"It is likely that deals are being reconsidered or postponed," said Evans, immediate past president of the Indiana
Commercial Board of Realtors. "Or decisions are being made to go to places with more certainty than where there is all
this uncertainty."

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